Billionaire investor Carl Icahn has secured one out of four board seats he sought at drugmaker Forest Laboratories Inc FRX.N in a bitter proxy fight, according to an early tally of shareholder votes at the company's annual meeting on Wednesday.
Preliminary results showed that Icahn nominee Pierre Legault, a former executive at several big drugmakers, will join the 10-member board, replacing current director Dan Goldwasser, chairman of the compensation committee.
"Shareholders are sending the message loud and clear that they're fed up," Daniel Ninivaggi, one of the Icahn nominees and president of Icahn Enterprises, told reporters after the Forest meeting in New York.
Icahn has criticized the company for being ill-prepared to generate new growth as generic competition curtails revenue from two of its biggest-selling treatments - Lexapro for depression and Namenda for Alzheimer's disease.
Ninivaggi said Forest needs to be more open about succession plans for its long-time chief executive, Howard Solomon, and should adopt basic corporate governance measures.
But the election outcome falls short of Icahn's aims and Forest officials noted they had already offered him a director's seat during a previous proxy fight last year. Icahn had also sought seats for Ninivaggi, Eric Ende, a former analyst at Merrill Lynch, and Andrew Fromkin, former chief executive of Clinical Data.
The outcome barely affected Forest shares, which were down 0.2 percent at $33.90 on Wednesday afternoon. Wall Street analysts said they did not expect much of an impact going forward.
Corey Davis, an analyst at Jefferies & Co, said Forest's research and development record was "impeccable," even if its recent commercial performance has been lacking.
"In my mind there is nothing a new board is going to do to materially change that. It is simply a function of the new pharmaceutical market dynamic that we are all in now," Davis said. "The prospects for the stock as a standalone are almost as bright as they would be for any would-be suitor."
Kenneth Goodman, Forest's president from 1998 to 2006 and currently the company's presiding independent director, said the election of only one of Icahn's four nominees reflects shareholder confidence in the company's strategy.
"We look forward to working with him in a constructive manner to build value for all Forest shareholders over the long term," Goodman said in a statement, referring to Legault.
Frank Perier, Forest's chief financial offer, repeated that the company has a "very strong" succession planning process under way and is continuing to evaluate internal and external candidates with help from an outside search firm.
Forest argued that Icahn's nominees would not add any value to its board and cited conflicts of interest for Ende and Fromkin, making them unfit for board positions. Forest rejected efforts to broker an agreement with Icahn.
Shareholders received conflicting advice from influential proxy advisers. Institutional Shareholder Services backed the nominations of Legault and Ninivaggi, while Glass Lewis & Co rejected Icahn's entire slate.
Icahn has attacked Forest on multiple levels. He said Forest is trying to sell products in too many therapeutic areas and its sales force is therefore inefficient, and has recommended some products be divested.
He also said the company promoted the son of 84-year-old CEO Solomon beyond his abilities with the aim of installing him in the top job.
(Additional reporting by Deena Beasley. Editing by Michele Gershberg, John Wallace, Steve Orlofsky and Andre Grenon)